October 31, 2022
Hot off the press! On October 25th the House of Commons met for a reading of the existing Financial Services and Markets Bill to discuss much-needed updates. One proposal in particular, from MP Andrew Griffith, has piqued our interest. Andrew Griffith MP is Economic Secretary to the Treasury and has sought to amend the Financial Services and Markets Act 2000 to introduce crypto assets. Andrew wants to clarify the scope of “investment” for the purposes of the financial promotions restriction under the current legislation.
This is big news for the crypto space, and will significantly alter the UK landscape of regulation (and attitudes) towards crypto assets.
The draft bill now features regulations that concern both stablecoins and crypto assets.
In May, it was reported that the Financial Services and Markets Bill will include stablecoin regulation, where stablecoins are used as a form of payment, but clearly, the wording in the Bill now gives a fuller legal definition of crypto asset, which is not limited only to DLT-based assets. Instead, the latest version of the bill broadly takes the definition of crypto asset from the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017:
“Crypto asset’ means any cryptographically secured digital representation of value or contractual rights that:
The guidance in the Bill goes on to state that:
“This new clause amends the Financial Services and Markets Act 2000 to clarify that the powers relating to financial promotion and regulated activities can be relied on to regulate crypto assets and activities relating to crypto assets. Crypto asset is also defined, with a power to amend the definition” the Government’s statement on the Bill reads.
The proposed draft bill is yet to be enacted, however. At the time of writing, the bill is at the “Committee Stage” and must next proceed for its third reading, after which it will be sent to the House of Lords, the upper house of Parliament. The final step in the process is getting a stamp of approval from newly-crowned King Charles III, after which the bill will become law.
Our resident regulatory guru, Gareth Malna, gave us his take:
“It's only taken 12 years since the introduction of Bitcoin for the UK to make a formal legislative step with crypto. And, whilst it's a pretty simplistic one, it's better than nothing, because the crypto train is leaving the station, and we've only got one foot inside the carriage. My primary concern is the sheer amount of interpretative wiggle room that exists under the new definition of "crypto assets", which the EU did a pretty good job of working through when they drafted the MiCA Regulations. So, I suspect that projects are still going to need a lot of guidance on these rules and their effect in particular circumstances. Good news for lawyers, bad news for clients."
But let’s not get ahead of ourselves – this isn’t the end of the road. If the Bill passes, the FCA has made it clear that it will bring crypto assets (as defined) into the remit of the new rules on financial promotions for high-risk investments and firms approving financial promotions once they are implemented between December 2022 and February 2023.
We may yet see further changes to this bill before it gets passed as law, so everybody keep your fingers and toes crossed and watch this space…
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